Circle Public Chain Arc: A new Layer1 revolution of Libra + Monero + Consortium Chain

“Stablecoin First Stock” Circle announced its latest plans in its Q2 2025 financial report, including a new public blockchain called Arc, which is a Layer 1 dedicated to stablecoins. It clearly targets competitors like Tether’s Plasma and Stable. Arc will launch a public testnet this fall. Let’s take a look at Circle’s latest creation and its technical features.

First, Arc is a Layer-1 blockchain compatible with EVM, designed specifically for stablecoin finance and asset tokenization. It provides a foundational settlement layer for programmable money on the internet, especially suitable for global payments, foreign exchange (FX), and capital markets. Its goal is to address existing issues with public blockchains in enterprise and institutional applications, such as volatile transaction fees, uncertain settlement, and lack of privacy. We know that Arc is closely related to payments, and notably, it seems not to be aimed at consumers.

Key Technical Features of Arc

Using USDC as Native Gas and Stable Fee Mechanism

Arc uses USDC as the native asset for paying transaction fees (Gas). It adopts a fee market mechanism inspired by Ethereum’s EIP-1559, but updates the base fee using an exponential weighted moving average of block utilization to smooth short-term fluctuations, ensuring transaction costs remain low.

In addition to USDC, Arc plans to support Gas fee payments for other stablecoins and tokenized fiat currencies through a dedicated “Paymaster” (a payment channel).

Extremely High Performance

Arc employs a high-performance consensus engine called “Malachite,” based on Tendermint BFT protocol. This enables deterministic finality, with transactions confirmed and irreversible in under a second.

The network is secured by a limited set of permissioned, geographically distributed reputable institutions acting as validators. These validators are publicly identified and must adhere to high standards of accountability and operational security. This setup is reminiscent of Libra.

In a test setup with 20 geographically distributed validator nodes, Arc can handle approximately 3,000 TPS, with finality confirmed in under 350 milliseconds. With just 4 validator nodes, throughput exceeds 10,000 TPS, and finality time drops below 100 milliseconds.

Optional Privacy Features

Arc’s privacy roadmap begins with “Confidential Transmission,” which encrypts transaction amounts so they are not visible to the public, while addresses remain visible. This is a very B2B feature, protecting commercial sensitive information.

Additionally, for regulatory compliance, Arc’s privacy model allows selective disclosure via mechanisms like “view keys,” similar to Monero. Many transactions are private but can be authorized for third parties (such as auditors or regulators) to access specific data. Institutions can always fully view their clients’ transactions to meet AML and travel rule requirements.

Privacy features are implemented through modular backend technology, initially using Trusted Execution Environment (TEE) to handle encrypted data. Future plans include integrating advanced techniques like Multi-Party Computation (MPC), Fully Homomorphic Encryption (FHE), and Zero-Knowledge Proofs.

MEV Mitigation Roadmap

Arc believes not all MEV (Miner Extractable Value) is harmful. It categorizes MEV into “Constructive” (e.g., arbitrage that helps stablecoin price discovery) and “Harmful” (e.g., sandwich attacks).

To mitigate MEV issues, Arc’s roadmap includes implementing encrypted mempools, batch transaction processing, and multiple proposers to suppress predatory trading, while preserving beneficial arbitrage activities.

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